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Central bank buys Australian dollars amid plunge

Central bank buys Australian dollars amid plunge

Australia's central bank has taken the rare step of buying Australian dollars twice in the past few days to limit the currency's dramatic plunge.
The Reserve Bank of Australia "acted to provide liquidity to the market" on Friday night and again on Monday morning, a spokesman said on condition of anonymity because of bank policy.
He declined to say how much the bank had spent on the interventions.
Earlier this year, the Australian dollar reached 25-year highs against the U.S. dollar and appeared to be approaching parity until the global financial crisis sent it plummeting in the past three months.
Fears of a global recession have sent the currency reeling even further in the past few days.
On Friday, the Australian dollar fell nearly 10 percent to as low as $0.6048. It traded around $0.62 on Monday but closed lower in local trade, at about $0.61. The declines represent a fall of about 37 percent since mid-July, when it was trading at around 95 U.S. cents.
The spokesman said the bank did not have a preferred rate for the Australian dollar.
"It's not so much aiming at defending any particular figure as much as providing some certainty to the market and some liquidity to the market, to the extent that's possible," he said.
The bank has intervened very rarely to support the currency _ in September 2007, and in 2001 when the Australian dollar fell below $0.50.
ABN Amro currency strategist Greg Gibbs said the bank's intervention appeared to have prevented further dramatic falls on Monday, but investors are not confident it won't fall further in coming days.
"They have achieved stability to a degree," Gibbs said of the bank's move, before adding: "There is no great sense that the central banks are in command."


Updated : 2021-04-13 13:10 GMT+08:00